You are currently long in a futures contract.You then instruct a broker to enter the short side of a futures contract to close your position.This is called __________.
A) a cross hedge
B) a reversing trade
C) a speculation
D) marking to market

Question

Quizplus · Accepted Answer

Instructing a broker to enter the short side of a futures contract to close your position is called a reversing trade. This means that you are essentially reversing your position in the futures market by taking an opposite position to the one you initially held. A cross hedge involves using a futures contract in a different market to hedge against a related but not identical asset, speculation involves taking a position in the futures market with the aim of making a profit, and marking to market is the daily adjustment of the value of a futures contract based on the current market price.

You Are Currently Long in a Futures Contract